Business Analytics

Why You Should Buy Dividend Paying Stocks

Investing in dividend earning stocks is one of the best and certain methods for building a steady income, and it’s an opportunity that literally anyone can take advantage. Any company that is worth owning stocks of would in due course make money which would be shared among its shareholders. Hence investing in a dividend paying stock is considered a safe move.

What are Dividends?

Dividends are small payments that companies and corporations pay to their shareholders. If you own stock in a company, you are a shareholder. Dividends are usually paid on a quarterly basis, meaning 4 times a year — of course, this depends on the company. This in fact does not require you to be on a constant watch out of the performance of the company.

Advantages of Dividend Investing

  • Companies that pay high dividends are favorites among investors who are interested in income investing, like retirees.
  • Individuals who like to see consistent income coming from their shares to use for monthly expenses like the consistency and would rather see monthly dividends instead of selling stock when they need cash.
  • You don’t have to be retired to enjoy the benefits of dividend investing – the principles of passive income are the same for everyone.
  • When researching companies for stock investing, always factor in dividends. The capital gains return might not look that good but once you factor in the dividends, the return may go up considerably.
  • Reinvesting dividends means you are taking the dividend payments and using them to buy more shares in the company.
  • By reinvesting the dividends you make, you can buy more shares allowing you to earn more dividends.

Is Buying High-Dividend Stocks Worth It?

  • A stock with a three monthly dividend checks a bonus. It’s not the only reason to own a stock, but many good stocks do pay good dividends.
  • It’s more important to us to own stocks in great companies than to chase a dividend of 6% or 8% or 10%.
  • Those high dividend yields are from companies with real financial troubles, and those yields won’t last.
  • Sometimes the market really does offer you a good discount on a great stock.
  • We’re always looking for bargains, and a great stock at a good price with a good dividend is a real find.
  • A dividend yield of 2% combined with a company that can increase its value by 10-12% annually.

How to Choose a Company to Invest in?

Not every company performing well would give you great dividends; there have been big companies that have failed share pricings. Hence for you to get good returns it is imperative that you invest in companies that actually have a good track record of delivering dividends.

Check for PE Ratio

Public limited companies that are listed on the stock markets need to show their finance status every quarter of the year. You can access their PE ratio through Google. Always check for companies that have a ratio between 1and 18. These companies would give good dividends.

Dividend Yield Percentage

You can also check for the Div Yeild % of the company. Choose companies that give more percentage than the others and those that have been consistently doing so.

Investing in stocks should never be done on hearsay or in a hurry, do your homework, zero down the best company and then invest.

Photo Credit: expertbeacon.com

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